In previous years it certainly made good estate planning sense when buying fixed property, either a residence, a holiday home or business premises, to register this property in an 'inter vivos' trust. This form of registration ensured that the growth of value of the property was ring-fenced within the trust and did not affect the value of the individual's estate and provided for continuity through generations.

This is according to David Knott, a fiduciary specialist from Private Client Trust who advises that some even recommended that you should register in a trust so as to enable the trust and not the property to be 'sold' later, thereby bypassing the payment of transfer duties.

"This was clearly not what government had intended, and the legislation was amended accordingly only once the practice had become popular. Many of our trust law specialists had always argued that such a 'sale' was voidable as the 'selling' of a trust conflicted with established trust law. Buyers continued to risk the consequences of a voidable 'buying' of a trust as both parties wished the transaction to succeed," says Knott.

However, Knott advises that this practice has ceased since the introduction of Capital Gains Tax, with effect from 1 October 2001.

"This introduction has brought about many unintended consequences of past good planning. Capital Gains Tax now makes it onerous to hold fixed property in a trust, and one should carefully consider the financial implications before deciding how the property should be held. In the case of one's primary residence, it is almost always most cost efficient to register in the individual's name. This is because an individual is entitled to a rebate of R2 million off the gain when his or her domestic primary property is sold - this rebate is not granted to a trust or a company," says Knott.

In other words, a trust or company is liable for Capital Gains Tax from the first rand of gain from date of buying to date of sale, without benefit of the first R2 million gain. In addition, an individual is also taxed at a lower rate to that of a trust or company.

"In the case of a second holiday home or business premise, one needs to interrogate circumstances around such buying, the length of time that asset is to be held, the growth prospects of that asset and how it is to be utilised. Before such registration takes place one should also seek professional advice regarding Capital Gains Tax," says Knott.

In the 2018 and current 2019 tax periods, the inclusion rate and effective rates were:

Individual: inclusion rate 40% and maximum effective rate 18%

Trusts: inclusion rate 80% and maximum effective rate 22.4%

Companies: inclusion rate 80% and maximum effective rate 36%